Welcome to Marketing BS, where I share a weekly article dismantling a little piece of the Marketing-Industrial Complex — and sometimes I offer simple ideas that actually work.
If you enjoy this article, I invite you to subscribe to Marketing BS — the weekly newsletters feature bonus content, including follow-ups from the previous week, commentary on topical marketing news, and information about unlisted career opportunities.
Thanks for reading and keep it simple,
Edward Nevraumont
Facebuck
Let’s kick things off with some crypto-context from the Wall Street Journal:
Facebook Inc. unveiled plans to launch a cryptocurrency in a move that could diversify its business from advertising while expanding into financial services long dominated by Wall Street.
The cryptocurrency, called Libra, will be a secure blockchain-based payment system backed by hard assets and designed for ordinary users, making it among the boldest efforts yet to bring digital currencies into the mainstream.
Facebook on Tuesday named a series of corporate partners — including financial-services heavyweights Mastercard Inc. and PayPal Holdings Inc. and tech giants Uber Technologies Inc. and Spotify Technology SA — that it said would help it create a “secure, scalable and reliable” cryptocurrency.
The Wall Street Journal reported in May that the initiative involved developing a “stablecoin” — a digital asset backed by a basket of global currencies or other investments…
First of all, let’s be crystal clear what the Libra announcement is NOT:
An attempt by Facebook to profit off cryptocurrency speculation.
A long-term strategy of raising enough money to build a decentralized platform for an “Initial Coin Offering” (ICO).
A convoluted scheme to encourage foolish people to purchases the currency, only to turn around at a later date and resell it to even greater fools.
Before falling prey to the conspiracy theorists, let’s consider a few core facts about Libra. First off, the cryptocurrency launches sometime in 2020; as such, investors have ample time to analyze Facebook’s rollout of the specific details. More importantly, Libra has been devised as a “stablecoin” — a cryptocurrency backed by a reserve of real-world assets, including a mix of global currencies and government securities. (Rumors indicate Facebook will lean heavily on USD and the Euro). Because Libra is designed to minimize the volatility associated with cryptocurrencies, there will be minimal value (and thus, interest) for speculators.
So, what DOES the Libra announcement share in common with the plethora of other ICOs from the last couple of years? Ummm...Facebook followed the cryptocurrency convention of issuing a whitepaper. That’s about it.
But WHY— that’s the question on everyone’s mind, right?
Kevin Drum from Mother Jones voices strong skepticism for Libra:
Then there’s Facebook’s Libra, which I don’t get for an entirely different reason: it’s not, as near as I can tell, a cryptocurrency. It’s just scrip, backed by dollars. Maybe they’re using blockchain somewhere in there as a distributed ledger, but if they are it’s not because they need to. It’s only so they can say “blockchain” at their press conference.
And in what way will it make transactions more frictionless? It’s going to be connected to the banking system in some way, since it’s designed for use by merchants who will insist on actually being paid for stuff, and that means it will be tied to a bank account or a credit card or a jarful of quarters that you prepay to the FaceBank. This is how the One-Click button works on Amazon, and it’s hard for me to understand how anything online could be any more frictionless than that. [Emphasis mine]
The answer, as near as I can guess, comes from [an] excerpt quoted [in Politico]: “….And importantly for Facebook shareholders, the company could make money off a fee for every processed transaction.” [Emphasis from Drum]
Kevin Drum is not the only Libra cynic; in fact, he’s nowhere near as disparaging as some others. Chris Hughes, the Facebook-cofounder-turned-outspoken-critic, envisions Libra as a weapon in Facebook’s quest for world domination. In The Financial Times, Hughes outlined the worst case scenario:
Move fast and break things — our mantra in Facebook’s early days — was an appropriate slogan for a college social network. It’s not appropriate for the global monetary system.
If even modestly successful, Libra would hand over much of the control of monetary policy from central banks to these private companies, which also include Visa, Uber, and Vodafone. If global regulators don’t act now, it could very soon be too late.
Let us imagine that Libra works as planned. Hundreds of millions of people around the world will be able to send money across borders as easily as they send a text message. The Libra Association’s goals specifically say that ability will encourage “decentralised forms of governance”. In other words, Libra will disrupt and weaken nation states by enabling people to move out of unstable local currencies and into a currency denominated in dollars and euros and managed by corporations. [Emphasis mine]
The truth, I believe, is both more interesting than Kevin Drum suggests and more prosaic than Chris Hughes’s cataclysmic predictions.
Could Facebook (and their consortium of corporate partners) actually “make money off a fee for every processed transaction”? Absolutely. But I don’t believe that’s the point. The point isn’t to MAKE money; the point is to SAVE money. Remember: every time you buy something with a credit card online, the merchant pays a fee. Despite a gradual reduction in those fees, they are still impactful. Most credit card agreements involve a combination of a fixed fee and a variable fee (e.g., $0.30 + 2.5% of the transaction). The fixed fee part explains why some smaller retailers enforce minimums on credit card transactions — if they only make $0.20 margin when you buy a chocolate bar, they will be underwater after a $0.30 + 2.5% fee on the transaction.
The consequence of those transaction fees? Some business models just don’t work on the internet. For instance, various media agencies have attempted to develop strategies that result in “micropayments” when people read their content, but the plans never get off the ground. Transaction costs are just too high.
There are, of course, examples of successful micropayments. In China, many popular podcasts monetize not with advertisements, but with tipping (courtesy of listeners). This situation is possible because of Tencent, which owns the payment network, allowing them to process transactions without (high) credit card fees.
My perspective: Libra is NOT an attempt to profit on the digital currency wave; it’s an attempt to replicate the domination that Tencent has achieved in China.
Here’s another idea that I think needs broader acceptance: Libra is not an attempt to “steal” your personal information.
Consider the following comments from the WSJ piece I cited earlier:
Facing continuing scrutiny of its privacy practices, Facebook introduced Libra in a manner that seemed intended in part to head off potential regulatory concerns. It said it is creating a subsidiary, called Calibra, that would be governed with the help of external partners, to ensure “the separation between social and financial data.” Calibra will offer a crypto wallet — a digital app that can be used to pay for items online and send money — using Libra.
Facebook envisions Libra being used to make everyday financial transactions like paying bills, making retail purchases and paying for public transport.
During the Libra announcement, Facebook highlighted three significant details about their plan:
The currency will be issued by a third-party consortium that includes many different partners.
The consortium — not Facebook — will hold ultimate decision-making power.
Personal information will be kept separate from financial data.
In simplest terms, Facebook is proclaiming, “We won’t invade your privacy.”
Of course, Facebook WOULD benefit — greatly — if they could access transaction information on the platform. Actual purchase data is the one form of ad targeting that seems to be effective (which explains Amazon’s rapid growth as an ad platform), but that is not the rationale for introducing Libra. The goal is a system that allows micropayments at ridiculously low transaction costs — maybe even zero.
(That said, I would not be surprised if Facebook still manages to collect SOME shopping information, perhaps by analyzing the timing of users’ Facebook logins and Libra activity. In any case, the success of the currency does not rest on surreptitious data capture, which — if exposed — Facebook could easily abandon).
One obvious question: why would merchants accept Facebucks over traditional USD?If Libra is ONLY good for micropayments, then Facebook will encounter the problem that confronted every previous attempt at micropayments —why would a person load up a digital wallet BEFORE they need to make a payment? Conversely, when people without digital wallets decide to make a purchase, the friction of creating an account would defeat the entire point. Building a new currency is a chicken-and-egg conundrum. No consumer wants to enrol in a platform that lacks places to spend money, but no merchant wants to invest in a system that no one is using.
Facebook offers a solution to the chicken-and-egg problem.
With reasonable ease, Facebook could issue currency to users for performing tasks that Facebook wants them to do — like interacting with ads. Once users accumulate some Facebucks, they’ll be motivated to find a place to use them (or at least register for the platform).
On the merchant side, Facebook controls another lever. Why do merchants accept USD (beside the obvious “because everyone else accepts them”)? Merchants accept USD from customers so that they can turn around and buy stuff they need (like food, water, and shelter). But why, then, do sellers of food, water, and shelter accept USD? Mostly because American currency is the most successful “collective delusion” ever created (what else to socialists, capitalists, atheists, and religious fundamentalists agree on?!). More practically, the USD is the only legitimate option for paying United States taxes. As such, there will always be a demand for the currency as long as America continues to exist (and keeps charging taxes).
In essence, Facebook has developed their own version of United States taxes: the Facebook Ad Platform. A significant number (and wide variety) of merchants advertise on Facebook. I expect sometime in 2020 you will see the ability to buy Facebook ads with Facebucks — and likely at a discount to the USD.
Where does that leave us? With consumers who earned a bunch of FB$ based on their Facebook activity, as well as a bunch of merchants who want to collect FB$s in order to spend on Facebook ads. The company has created an instant market for their currency.
And once Facebucks get traction, imagine how quickly they might spread through the internet. You could be able to use them for a ride from Uber (already a partner), to listen to music on Spotify (another partner), and to buy from all your everyday merchants (many of which might be partners). More importantly, you could be able to use Facebook’s cryptocurrency for micropayments that just aren’t possible today, like tipping your favorite podcast host.
You Cannes Do It!
Last week, industry luminaries gathered for the Cannes Lions International Festival of Creativity, sometimes referred to as the “Oscars for Advertising” (not to be confused with the Cannes Film Festival and its Hollywood stars).
Companies vie for a series of prizes that recognize the most creative advertising spots. Although the number of submissions for this year’s event was slightly down (-4%), there were still 30,953 entrants. I cannot fathom how advertisers believed that 30,000+ of their projects deserved consideration as the MOST creative, but the more the merrier I guess.
The 2019 finalists include some of the most “famous” campaigns of the last year. Even if you never watch TV (or if you don’t work in marketing), you are likely to have stumbled upon some of these advertisements:
Nike — Dream Crazy (narrated by Colin Kaepernick)
Burger King — Whopper Detour (drive to McDonald’s and order a Whopper for $0.01)
John Lewis & Partners — The Boy and The Piano (starring Elton John)
Over the five days of festivities, attention shines on many advertisements (just not on 30, 953 of them…). Among the various sets of awards, the most prestigious are the coveted Grand Prix Lions, which span 26 categories (and it’s not uncommon for a marketing campaign to win multiple awards). Burger King’s “Whopper Detour” was the big winner, with three awards (Titanium, Direct, and Mobile). Nike’s “Dream Crazy” collected two (Outdoor and Entertainment for Sport), while the Elton John ad was surprisingly passed over. (Check out all of the 2019 Grand Prix Lions here).
Events as large (and glitzy) as the Cannes Lions are easy targets for critics. Mark Ritson, the leading columnist for Marketing Week, released a particularly mocking take on the festival:
Bob Hoffman, the “Ad Contrarian,” wrote a satirical post on LinkedIn that should fill your day with laughter. An excerpt:
For the 100th consecutive year I did not go to Cannes. But the good thing is, I know exactly what happened and saved myself thousands of dollars. As a free service to you other losers who didn't attend, here's what you missed
A very casually dressed ceo from a very big holding company said that the consumer is changing and we have to change to keep up with the changing consumer. He said we have to evolve or die.
Another famous creative person with very expensive eye-wear said we need to be brave. Those that aren't brave won't last.
A very European planner gave a talk about how we have to stop thinking short-term and realize that brands are built by long-term strategy. Those who focus on the short-term will disappear in the long-term. (Then she hurried out to see how many tweets her talk got.)
We laugh at Hoffman’s points because we recognize their truth. Cannes Lions is a circus of “visionaries” who talk about disruption and diversity without really embracing the complexity of those ideals. Case in point: the conference invited the ex-CEO of Cambridge Analytica to speak, but protests caused his cancellation. Dissent will not be tolerated!
Let’s return to the (ostensible) raison d'être for the Cannes Lions — the advertisements. I’d like to unpack what makes the Grand Prix winners so “effective” — at least in terms of generating attention (because comparing their actual ROIs is virtually impossible). Measuring success for these ads requires more than simply counting the number of times they are seen “in the wild” — the real test is the ability to generate a public relations spectacle AROUND the ads. No company is paying for a regular rotation of two-and-a-half-minute ads on television. The full-length ads were created for viewing on YouTube (29.5 million times for the Nike spot), not on actual ad-supported television. Yes, shorter versions were shown on TV, but those spots were largely intended to spark media interest in the company’s new advertising strategy.
There is a significant difference between a campaign that people “like” and a campaign that attracts widespread PR coverage. Achieving the latter is (obviously) tricky, and usually requires a combination of the following three elements:
Commitment to artistic excellence or creative experimentation
Desire (and willingness) to court controversy
Luck – a whole bunch of absolute luck
The Nike and Burger King ads definitely hit the requirements for points 1 and 2; their prominent brand status increased the chance of achieving point 3. An idea worth noting: when a big brand takes a controversial position, it’s inherently newsworthy. Companies like Nike hold a lot of brand equity; when they choose to risk that equity with a significant subset of the population, the media starts discussing the issue (and so do consumers). For small brands, there are much lower consequences for choosing to risk some brand equity, which makes being controversial a lot less interesting.
In time, all of those campaigns succeeded in attracting free media coverage, the same way Donald Trump “managed” the media during his Presidential bid. By regularly uttering controversial statements, Trump provided a supply of content for the media to debate (and that strategy took him all the way to the nomination and the presidency). The Nike and Burger King ads (and others like the Gillette “toxic masculinity” ad) try to copy the same tactic — wield controversy as a tool to obtain free media coverage, attention, awareness, and consideration.
Attention, awareness, and consideration — those are the goals that advertisements are trying to reach. Winners at the Cannes Lions are almost certain to achieve those goals via the copious (and free!) media coverage. Do you know what’s far less certain? The effectiveness of these ads when an average consumer sees them midway through an episode of The Big Bang Theory. (In the case of the Elton John ad, I challenge you to watch it and guess, 1) what company it is advertising, and 2) what the heck that company does. Hint — it’s not really pianos).
In a future post, I will share my experience about building an effective television advertisement (and TV advertising in general). But for now, I am firmly aligned with Ritson and Hottman’s criticisms of the Cannes Lions. I do not believe that companies should invest significant resources into campaigns where the primary goal is “being recognized as creative.” Yes, creativity was PART of the reason these ads were effective, but it wasn’t creativity alone that garnered attention. The winning formula included creativity + controversy + big existing brand equity + media management. “Creative Advertising Awards” only recognize one part of the equation.
Follow-up: Privacy as a Marketing Tool
Two weeks ago, I shared my take on Apple’s increasing emphasis on privacy. The company continues to preach their message. Last week, Tim Cook spoke at the Stanford commencement address. From Geekwire:
Cook is in the habit of taking Apple’s tech industry peers to task over privacy violations and data breaches. He was a vocal critic of Facebook during the Cambridge Analytica scandal, which allowed political operatives to access user data without their consent.
“If you built a chaos factory, you can’t dodge responsibility for the chaos,” Cook said during the Stanford address. “Taking responsibility means having the courage to think things through and there are few areas where this is more important than privacy.” [Emphasis mine]
In reality, consumers believe MANY things are more important than privacy, while there are — at the moment — few things that Apple values more.
Meanwhile, Google continues to find themselves on the defensive end of the issue. The “Sign In with Apple” announcement emphasized the flaws of the current “login with Google” model. Mark Risher — who oversees Google’s account security — responded during an interview with The Verge (one that I highly recommend reading). Risher echoes two points I’ve offered recently: 1) none of these announcements are truly about privacy, and 2) Google doesn’t use the information from “single sign-on” (SSO) to run ads against users. SSO tools strive to make the internet safer (with the inference that a safer internet encourages more internet use which, in turn, generates more money for Google). Risher says he doesn’t care if people use Apple’s SSO or Google’s SSO (or presumably Facebook’s SSO) — as long as people use one of the services, all boats will be raised.
Risher offers a top-notch illustration for the strategy of using distinct passwords on different sites versus embracing one SSO for all internet activity:
People often push back against the federated model, saying we’re putting all our eggs into one basket. It sort of rolls off the tongue, but I think it’s the wrong metaphor. A better metaphor might be a bank. There are two ways to store your hundred dollars: you could spread it around the house, putting one dollar in each drawer, and some under your mattress and all of that. Or you could put it in a bank, which is one basket, but it’s a basket that is protected by 12-inch thick steel doors. That seems like the better option!
Moral of the story: stop putting your (password) money in your toilet tank and under your couch cushions, and place it in the bank of Facebook, Apple, or Google.
Follow-up: State of the Internet Redux
Last week, I shared my thoughts on Mary Meeker’s State of the Internet report. And yet I dropped the ball by not covering one very relevant Meeker slide on privacy:
Okay, so 52% of people CLAIM to be concerned about internet privacy. But that percent has been DOWN every year since GIGI-IPSOS started collecting it in 2014 (when it was at 64%). Even though the media has obsessed over the topic. Raymond Hua et al have created a site where you can track appearances of a word in the New York Times over the years. Here is what “privacy” looks like since 1970:
The New York Times is not alone. Governments around the world have skewered Facebook for their (often careless) treatment of user privacy. Two weeks ago, the news cycle devoured some emails that Mark Zuckerberg wrote — years ago — dismissing user privacy. From the WSJ:
FacebookInc. uncovered emails that appear to connect Chief Executive Mark Zuckerberg to potentially problematic privacy practices at the company, according to people familiar with the matter.
Within the company, the unearthing of the emails in the process of responding to a continuing federal privacy investigation has raised concerns that they would be harmful to Facebook—at least from a public-relations standpoint—if they were to become public, one of the people said.
The potential impact of the internal emails has been a factor in the tech giant’s desire to reach a speedy settlement of the investigation by the Federal Trade Commission, one of the people said. Facebook is operating under a 2012 consent decree with the agency related to privacy, and the emails sent around that time suggest that Mr. Zuckerberg and other senior executives didn’t make compliance with the FTC order a priority, the people said.
I do not think anyone is surprised that Zuckerberg trivialized privacy concerns. CNBC features a list that spans years of his opinions on privacy. Generally speaking, I agree with their statement:
...a fairly consistent pattern has emerged. Zuckerberg and other Facebook employees rarely talk about “privacy,” but rather operate from the assumption that people want to share information, as long as they can control how it’s used. And as was the case with Facemash, sometimes the company goes too far — in which case Zuckerberg apologizes, Facebook makes changes, and life goes on.
Most of the time, Zuckerberg is not apologizing to users per se. Instead, he directs his apologies to the media — who have found something to be upset about. Ultimately, Zuckerberg seems to truly believe that people don’t care about privacy; in fact, he thinks users will continue to move in the direction of “sharing more.” Some relevant quotes from the same CNBC piece...
From 2008, when he coined “Zuckerberg’s Law”:
“I would expect that next year, people will share twice as much information as they share this year, and next year, they will be sharing twice as much as they did the year before,” he said. “That means that people are using Facebook, and the applications and the ecosystem, more and more.” [Emphasis mine]
From a Wired interview in 2009:
I would just expect is that as time goes on, we’re just going to keep on moving more and more in that direction....Just from the launches that we’ve had, it’s pretty clear that we haven’t mastered the art of moving people along in terms of change, making these changes; but I think we’re getting better at it.” [Emphasis mine]
Speaking at a conference in 2010, Zuckerberg elaborated on his thoughts in greater detail:
“When we got started… the question a lot of people asked is, ‘Why would I want any information on the internet at all? Like, why would I want to have a website?’ And then, in the last five or six years, blogging has taken off in a huge way, and all these different services that have people sharing more information. And people have really gotten comfortable not only sharing more information — and different kinds — but more openly with more people. And that social norm is just something that’s evolved over time. And we view it as our role in the system to constantly be innovating and updating what our system is to reflect what the current social norms are... I think... ‘What would we do if we were starting about the company now, and the site now? ’ We decided that these would be the social norms now and we just went for it.” [Emphasis mine]
Despite all the outrage and scorn, Zuckerberg is right: in most contexts, people do not care very much about privacy. Even the 52% of people who CLAIM to care about privacy do not ACT on their concerns. Consider the current status of DuckDuckGo, a search engine that 1) provides results comparable to Google, 2) features anonymous browsing, and 3) does not track any of your data. You might expect privacy-conscious users to gravitate toward a search engine that offers both quality and privacy, yet DuckDuckGo holds a mere 1% market share in the United States. DuckDuckGo also displays far fewer ads, because it’s not worth the time of marketers to spend on an unpopular platform.
Once again: privacy is a marketing issue. And, essentially, it’s more of a PR and governmental affairs issue — aside from reporters and congressional representatives, most of us don’t really care (at least according to our actions).
Keep it simple,
Edward
Comments